Skip to content
team-hands_1920x1080

Leading and Lagging KPIs: What They Are and Why They Matter for Your Business

Listen to Audio Version:
Leading and Lagging KPIs: What They Are and Why They Matter for Your Business
6:00

When it comes to measuring business performance, Key Performance Indicators (KPIs) are essential tools. But not all KPIs are created equal. Some track what's already happened, while others give you early warning signs of what’s to come.

Understanding the difference between leading and lagging KPIs can help you make better decisions, stay focused on what really matters, and drive your business forward.

What Are KPIs?

Key Performance Indicators (KPIs) are measurable values that show how effectively a business is achieving its core objectives. They can cover everything from financial results and customer retention to marketing performance and employee satisfaction.

If you’re already thinking about the future of your business, KPIs are a vital part of your planning. To learn how they fit into a wider strategy, explore our article on how to create a business growth plan.

The Difference Between Leading and Lagging KPIs

Lagging KPIs: A Look in the Rear-view Mirror

Lagging KPIs measure performance after the fact. They tell you what has already happened, such as your monthly revenue, profit margins or customer churn. These indicators are useful for reviewing progress against goals, but they cannot influence the outcome once it's occurred.

Common examples of lagging KPIs include:

  • Total sales for the quarter

  • Net profit

  • Customer satisfaction scores collected after service

  • Staff turnover rate

They are particularly helpful when reviewing results in monthly or quarterly performance meetings, or when you're reflecting on whether a strategic shift has paid off.

Leading KPIs: Signs of What’s Coming

Leading KPIs provide early insight into what might happen in the future. They help you identify potential issues before they impact results, allowing you to take proactive steps to improve performance.

Examples of leading KPIs include:

  • Number of new sales enquiries

  • Website conversion rate

  • Number of proposals sent

  • Employee engagement scores during active projects

By monitoring these early indicators, you gain the ability to course-correct and steer towards better outcomes.

Why You Need Both

Lagging KPIs are useful for understanding how your business has performed, while leading KPIs give you a way to influence future results. Both play an important role in effective decision-making.

Businesses that rely solely on lagging indicators often find themselves reacting too late. Incorporating leading KPIs gives you the advantage of being proactive, helping you address challenges before they become major issues.

This concept is explored further in our insight on where strategy meets execution, where the right KPIs can help bridge the gap between planning and action.

How to Make KPIs Work for Your Business

Here are seven practical ways to use KPIs effectively in a business setting:

1. Start with Clear Objectives

Begin by clarifying your business goals. What are you trying to achieve over the next quarter or year? Whether it’s increasing revenue, improving retention or expanding into a new market, your KPIs should directly reflect these objectives.

2. Choose the Right Mix

Use a combination of both leading and lagging KPIs to gain a comprehensive view of performance. Having too many of one type will limit your ability to assess outcomes or predict trends.

3. Make KPIs Actionable

Your KPIs should be linked to activities and behaviours you can influence. Focus especially on leading indicators that offer you the opportunity to change direction or improve performance in real-time.

4. Set Realistic Targets

Targets should be challenging yet achievable. They give your team something to aim for and allow you to track progress with purpose. Consistent reviews against these targets will help maintain momentum.

5. Monitor and Adjust Regularly

Build in time to regularly review and adjust your KPIs. As your business evolves, the metrics that matter most may also shift. Watch for patterns and trends, not just isolated figures.

6. Share KPIs Across the Team

KPIs are far more powerful when they’re shared. Ensure that everyone in your business understands which indicators are being tracked and why they are important. This builds alignment, accountability and motivation across the board.

7. Use KPIs to Drive Change

KPI data is only valuable if it leads to action. If sales enquiries are down, revisit your marketing strategy. If employee engagement is declining, investigate the underlying causes. Use KPIs as a trigger for positive change.

If you’re looking for support in using KPIs to steer your business forward, our resource on the reasons for an advisory board offers practical guidance on how external support can improve strategic decision-making and performance monitoring.

Leading KPIs in Action

Let’s say one of your lagging KPIs is total monthly sales. If that number is lower than expected, the opportunity to fix it has already passed.

Now, imagine tracking a leading KPI like the number of qualified leads in your pipeline. If that starts to dip, you can respond quickly by refining your outreach, adjusting your messaging, or launching a new campaign. That early insight can make all the difference when it comes to hitting your targets.

Measure What Matters Most

KPIs are not about tracking every possible metric. They’re about identifying the indicators that genuinely help you move the business forward. By combining leading and lagging KPIs, you gain a clearer picture of both where you've been and where you're heading.

The right indicators, used effectively, can enhance focus, refine execution, and yield better results.

If you want to explore this further with the support of a peer board or business coach, that’s exactly what we help business owners do every day at The Alternative Board.

team-hands_1920x1080

We've got boards running across the UK

Discover more by finding your nearest TAB board facilitator.

Latest insights and articles

How the Business Builder’s Blueprint Helps You Build Smarter, Not Harder

4 July 2025 | 3 minute read

Discover how the Business Builder’s Blueprint helps business owners work smarter, not harder, by offering strategic planning, accountability, and execution tools in one cloud-based platform.

Peer to peer advisory boards de-mystified

3 July 2025 | 2 minute read

Leslie Woodcock discusses business owner advisory boards, what they are, what they aren't and how they help business owners.

What does a business coach do?

2 July 2025 | 4 minute read

Many business owners are told that they should have a business coach. But what does a business coach actually do and how can facilitate business success?